Verizon Challenges Avaya's Takeover Of Nortel Unit

Avaya Inc.'s $475 million bid to acquire Nortel Networks Enterprise Solution unit has been rivaled by a new, undisclosed bidder for the unit. At the same time, Verizon Communications has protested Avaya's bid as jeopardizing U.S. national security.

Avaya, which was the first bidder in a "stalking horse" auction for the Nortel unit, wouldn't maintain certain public safety and defense equipment used throughout the U.S. if it acquires the Enterprise Solution unit from bankrupt Nortel, Verizon said in a filing in a bankruptcy court in Delaware.

Verizon has been supplying sensitive public safety gear to the Nortel unit, according to the Verizon court filing, but Verizon claims that Avaya wouldn't continue to support the equipment if it wins the bid.

In its court filing, Verizon stated: "Without this ongoing maintenance, service and support by the debtors, the continued communications capabilities of the government and business customers that are served by Verizon through the resale of the debtors... products and services -- specifically including the federal department, agencies and installations with critical national law enforcement, anti-terrorism and national defense responsibilities -- are at significant risk of disruption, which in turn poses a significant hazard to the public's welfare, security and safety."

Verizon said a second bidder has emerged for the Nortel unit in the stalking horse auction in which additional bids can be submitted to trump earlier bids. The identity of the second bidder hasn't been revealed publicly.

In an earlier stalking horse auction, Ericsson outbid Nokia Siemens Networks for Nortel's LTE/CDMA unit and agreed to pay $1.3 billion for the prized unit. Research In Motion, like Nortel, located in Ontario, has protested Ericsson's takeover of the LTE/CDMA operation.

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